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Macy's (M) Beats on Earnings in Q2, Raises FY21 Guidance
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Macy’s, Inc.’s (M - Free Report) shares went up 19.6% during the trading session on Aug 19, following robust second-quarter fiscal 2021 results. The company’s top and bottom line improved year on year as well as surpassed the Zacks Consensus Estimate. Further, it raised view for fiscal 2021.
The quarterly performance gained from strong sales across merchandise categories, as consumers continued to emerge from pandemic-led impacts. Additionally, the company gained from accelerated execution of the Polaris strategy as well as strong omni-channel capabilities. Such strategic efforts keep the company well positioned for growth in the forthcoming periods. Macy’s also revealed plans to boost shareholder wealth, through buybacks and dividends.
Shares of this Zacks Rank #1 (Strong Buy) company have increased 18.7% in the past three months compared with the industry's rise of 5.1%.
Image Source: Zacks Investment Research
Q2 in Details
Macy’s reported adjusted earnings of $1.29 per share, which surpassed the Zacks Consensus Estimate of earnings of 22 cents. The bottom line improved from a loss of 81 cents reported in the year-ago quarter. The figure also increased from adjusted earnings of 28 cents in second-quarter fiscal 2019.
Net sales of $5,647 million came ahead of the Zacks Consensus Estimate of $5,123 million. The top line surged 58.7% on a year-over-year basis. The metric inched up 1.8% from second-quarter fiscal 2019. Strong performance across brands aided the company’s top-line performance. As pandemic-led restrictions were lifted, the company witnessed strength across its merchandise categories. Occasion-based apparel items including denim, dresses and luggage saw strong revival. Other categories such as fragrance, jewelry and textiles, which were sturdy during the pandemic, continued to perform well.
Comparable sales surged 61.2% on an owned basis and 62.2% on an owned plus licensed basis, year over year. Compared with second-quarter fiscal 2019, comparable sales surged 5.8% on an owned basis and 5.9% on an owned plus licensed basis. Management highlighted that comparable sales reflect a trend improvement of nearly 16 percentage points compared with first-quarter fiscal 2021 levels. Comparable sales across the Macy’s, Bloomingdale and Bluemercury brands witnessed growth sequentially.
The company’s digital sales fell 6% from the year-ago quarter’s figure and contributed 32% to net sales. Digital penetration in net sales reflects a 22 percentage point decline from the prior-year period’s levels. Now that stores are fully open, omni-channel customers shifted to store shopping, leading to a decline in digital sales. Digital sales went up 45%. Digital penetration in net sales improved 10 percentage point from second-quarter fiscal 2019 tally.
In the reported quarter, the company acquired 5 million new customers, up 30% from second-quarter fiscal 2019. Of the new customers acquired, 41% came through the digital channel.
During the quarter, the company witnessed Platinum, Gold and Silver customers re-engage in its Star Rewards Loyalty program. Average customers spend improved 2 percentage points sequentially, while it went up 15% compared with second-quarter fiscal 2019 levels. Its Bronze segment, which comprises the most diverse loyalty tier, continued to grow by adding 2 million members.
Net credit card revenues amounted to $197 million, up $21 million from second-quarter fiscal 2019. The metric contributed 3.5% to sales, down 120 basis points (bps) year on year and up 30 bps from second-quarter fiscal 2019 levels.
Gross margin came in at 40.6%, increasing considerably from 23.6% in the prior-year quarter and 180 bps from second-quarter fiscal 2019. The upside was driven by higher merchandise margin, supported by strong pricing, promotions and solid inventory initiatives driven by the Polaris Strategy. Delivery expenses declined 310 bps from the year-ago quarter’s figure, while it increased 170 bps from second-quarter fiscal 2019 levels.
SG&A expense increased 35.8% year over year to $1,898 million. As a percentage of sales, SG&A expenses were 33.6%, down 560 bps year on year and 570 bps from second-quarter fiscal 2019.
Macy’s reported adjusted EBITDA of $836 million against adjusted EBITDA loss of $142 million in the year-ago quarter. Adjusted EBITDA amounted to $402 million in second-quarter fiscal 2019.
Macy’s had cash and cash equivalents of $2,137 million at the end of fiscal second quarter. Merchandise inventories, as of Jul 31, 2021, amounted to $4,298 million. Long-term debt and shareholders’ equity were $3,295 million and $3,146 million, respectively.
The company’s strong cash position encouraged management to invest in growth as well as de-levering the balance sheet. Accordingly, the company will be undertaking prudent share repurchasing actions. It has authorized a $500-million share repurchase program. The company reinstated its regular quarterly dividend of 15 cents per share, resulting in an annual return of cash to shareholders of nearly $200 million. The dividend is payable on Oct 1, 2021, to shareholders of record at the close of business on Sep 15.
In a separate release, Macy’s announced a partnership with WHP Global for bringing Toys"R"Us assortment across Macy’s stores as well as online. The partnership will help bring back the popular toys brand back to Americans. Toys"R"Us shop-in-shops will be rolled out in more than 400 Macy’s stores nationwide in 2022. Macy’s is excited regarding this partnership and expects the same to attract more customers.
Outlook
Management remains impressed with the company’s second-quarter performance. This along with strong market trends and increased traction of the Polaris strategy led management to raise view for fiscal 2021.
The company expects net sales in the bracket of $23.55-$23.95 billion compared with the previous guidance of $21.73-$22.23 billion. Adjusted earnings are now anticipated in the range of $3.41-$3.75 per share compared with the prior projection of $1.71-$2.12 per share. The Zacks Consensus Estimate for sales and earnings in fiscal 2021 is currently pegged at $22.2 billion and $2.33 per share, respectively.
As a percentage of sales adjusted EBITDA is expected in the range of 11-11.5% compared with 9-9.5% anticipated earlier.
Image: Bigstock
Macy's (M) Beats on Earnings in Q2, Raises FY21 Guidance
Macy’s, Inc.’s (M - Free Report) shares went up 19.6% during the trading session on Aug 19, following robust second-quarter fiscal 2021 results. The company’s top and bottom line improved year on year as well as surpassed the Zacks Consensus Estimate. Further, it raised view for fiscal 2021.
The quarterly performance gained from strong sales across merchandise categories, as consumers continued to emerge from pandemic-led impacts. Additionally, the company gained from accelerated execution of the Polaris strategy as well as strong omni-channel capabilities. Such strategic efforts keep the company well positioned for growth in the forthcoming periods. Macy’s also revealed plans to boost shareholder wealth, through buybacks and dividends.
Shares of this Zacks Rank #1 (Strong Buy) company have increased 18.7% in the past three months compared with the industry's rise of 5.1%.
Q2 in Details
Macy’s reported adjusted earnings of $1.29 per share, which surpassed the Zacks Consensus Estimate of earnings of 22 cents. The bottom line improved from a loss of 81 cents reported in the year-ago quarter. The figure also increased from adjusted earnings of 28 cents in second-quarter fiscal 2019.
Net sales of $5,647 million came ahead of the Zacks Consensus Estimate of $5,123 million. The top line surged 58.7% on a year-over-year basis. The metric inched up 1.8% from second-quarter fiscal 2019. Strong performance across brands aided the company’s top-line performance. As pandemic-led restrictions were lifted, the company witnessed strength across its merchandise categories. Occasion-based apparel items including denim, dresses and luggage saw strong revival. Other categories such as fragrance, jewelry and textiles, which were sturdy during the pandemic, continued to perform well.
Comparable sales surged 61.2% on an owned basis and 62.2% on an owned plus licensed basis, year over year. Compared with second-quarter fiscal 2019, comparable sales surged 5.8% on an owned basis and 5.9% on an owned plus licensed basis. Management highlighted that comparable sales reflect a trend improvement of nearly 16 percentage points compared with first-quarter fiscal 2021 levels. Comparable sales across the Macy’s, Bloomingdale and Bluemercury brands witnessed growth sequentially.
The company’s digital sales fell 6% from the year-ago quarter’s figure and contributed 32% to net sales. Digital penetration in net sales reflects a 22 percentage point decline from the prior-year period’s levels. Now that stores are fully open, omni-channel customers shifted to store shopping, leading to a decline in digital sales. Digital sales went up 45%. Digital penetration in net sales improved 10 percentage point from second-quarter fiscal 2019 tally.
In the reported quarter, the company acquired 5 million new customers, up 30% from second-quarter fiscal 2019. Of the new customers acquired, 41% came through the digital channel.
During the quarter, the company witnessed Platinum, Gold and Silver customers re-engage in its Star Rewards Loyalty program. Average customers spend improved 2 percentage points sequentially, while it went up 15% compared with second-quarter fiscal 2019 levels. Its Bronze segment, which comprises the most diverse loyalty tier, continued to grow by adding 2 million members.
Net credit card revenues amounted to $197 million, up $21 million from second-quarter fiscal 2019. The metric contributed 3.5% to sales, down 120 basis points (bps) year on year and up 30 bps from second-quarter fiscal 2019 levels.
Gross margin came in at 40.6%, increasing considerably from 23.6% in the prior-year quarter and 180 bps from second-quarter fiscal 2019. The upside was driven by higher merchandise margin, supported by strong pricing, promotions and solid inventory initiatives driven by the Polaris Strategy. Delivery expenses declined 310 bps from the year-ago quarter’s figure, while it increased 170 bps from second-quarter fiscal 2019 levels.
SG&A expense increased 35.8% year over year to $1,898 million. As a percentage of sales, SG&A expenses were 33.6%, down 560 bps year on year and 570 bps from second-quarter fiscal 2019.
Macy’s reported adjusted EBITDA of $836 million against adjusted EBITDA loss of $142 million in the year-ago quarter. Adjusted EBITDA amounted to $402 million in second-quarter fiscal 2019.
Macys, Inc. Price, Consensus and EPS Surprise
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Key Financial Aspects & Other Developments
Macy’s had cash and cash equivalents of $2,137 million at the end of fiscal second quarter. Merchandise inventories, as of Jul 31, 2021, amounted to $4,298 million. Long-term debt and shareholders’ equity were $3,295 million and $3,146 million, respectively.
The company’s strong cash position encouraged management to invest in growth as well as de-levering the balance sheet. Accordingly, the company will be undertaking prudent share repurchasing actions. It has authorized a $500-million share repurchase program. The company reinstated its regular quarterly dividend of 15 cents per share, resulting in an annual return of cash to shareholders of nearly $200 million. The dividend is payable on Oct 1, 2021, to shareholders of record at the close of business on Sep 15.
In a separate release, Macy’s announced a partnership with WHP Global for bringing Toys"R"Us assortment across Macy’s stores as well as online. The partnership will help bring back the popular toys brand back to Americans. Toys"R"Us shop-in-shops will be rolled out in more than 400 Macy’s stores nationwide in 2022. Macy’s is excited regarding this partnership and expects the same to attract more customers.
Outlook
Management remains impressed with the company’s second-quarter performance. This along with strong market trends and increased traction of the Polaris strategy led management to raise view for fiscal 2021.
The company expects net sales in the bracket of $23.55-$23.95 billion compared with the previous guidance of $21.73-$22.23 billion. Adjusted earnings are now anticipated in the range of $3.41-$3.75 per share compared with the prior projection of $1.71-$2.12 per share. The Zacks Consensus Estimate for sales and earnings in fiscal 2021 is currently pegged at $22.2 billion and $2.33 per share, respectively.
As a percentage of sales adjusted EBITDA is expected in the range of 11-11.5% compared with 9-9.5% anticipated earlier.
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